Fashion Briefing: More DTC brands are expanding to wholesale through big-box retailers

But despite the trouble facing Levi’s wholesale business, many fashion brands are currently taking the opportunity to invest in wholesale. For Nike, 2023 wholesale revenue before expenses was up 37% year-over-year, thanks to these expanded partnerships. True Religion, meanwhile, is planning to double its wholesale revenue this year. According to the wholesale platform Joor, 75% of its surveyed brands saw their wholesale revenue grow in the last year, and 33% said they’re specifically moving from a DTC focus to a blended or wholesale-first approach.

Meanwhile, digital marketing costs are skyrocketing across the industry. Total digital ad spending surpassed $600 billion last year. Even LinkedIn’s ad prices have soared, with the cost for 1,000 impressions rising to more than $300 in December. But as customer acquisition for direct sales gets increasingly expensive, brands are seeing the wisdom in having a strong wholesale business that can leverage retailers’ reach to bring in new customers. Increasingly, those brands are focusing on the biggest of big-box retailers, like Walmart, which have hundreds of locations and can reach more consumers than smaller specialty stores.

Speaking before the company’s layoffs were announced, Michelle Gass, CEO of Levi’s, signaled that the wholesale business would still be a focus for the brand, even given its recent challenges.

“Wholesale is still really important to us, but it’s been tougher,” she said at the National Retail Federation conference earlier this month. Levi’s e-commerce business has grown from 2% to 10% of total revenue in the last three years. “There are a lot of reasons for that. [That includes] congestion in our distribution centers, for example.”

Kristen D’Arcy, who stepped in as CMO of True Religion in July of last year, told Glossy that wholesale is a major area of growth for the brand, which saw its revenue hit more than $250 million in 2022.

“Our [direct] e-commerce business is great, but there’s still so much room to grow in our U.S. wholesale business,” she said. As a sign of the company’s commitment, she cited the May 2023 hiring of Jim Kushner as evp of North American wholesale. Kushner has over a decade of experience with wholesale-focused brands like Perry Ellis and Calvin Klein. “There’s so much we can double down on in wholesale.”

Kushner has helped push True Religion into wholesale retailers with broad reach, including Pacsun, which has over 300 stores, and Urban Outfitters, which has over 700. True Religion isn’t the only denim brand that has seen success in wholesale. Wrangler and Lee, both owned by Kontoor Brands, reported a joint 17% increase in profits in November thanks to the strength of their wholesale partnerships with big retailers like Walmart and Dillard’s.

Monica Royer, co-founder of the children’s apparel brand Monica + Andy, said her brand got off the ground with a DTC focus, but now that the brand is scaling up, she’s looking to wholesale to aid that expansion. The company started working with its first wholesale partner, Walmart, last year. It’s now in 1,200 Walmart locations and has launched Walmart-exclusive products. Walmart is the brand’s only wholesale partner.

“When we move into 1,200 Walmart stores, we can bring Monica + Andy to so many more families across the nation,” Royer told Glossy. “In the early days for our brand, we did around 14 pop-ups. It was a great way to meet and acquire customers. So now, to be in locations across the country is game-changing.”

Carina Donoso, vp of retail experience at the retail real estate development company WS Development, said brands are attracted by wholesale retailers’ “growing flexibility.” New tools at hubs like Shopify, which took a stake in online wholesale marketplace Faire in September, are bringing some of the conveniences of DTC to wholesale, she said.

“Wholesale is a potent marketing tool, especially when aligned with retailers with similar values,” Donoso said. “It is a powerful growth strategy, offering valuable feedback through interactions with buying teams, who can provide sell-through analytics and the performance of specific collection pieces.”

But wholesale isn’t without its issues. In addition to some wholesalers struggling, like Saks Fifth Avenue which has reportedly been unable to pay its brands on time, there are also brands for which wholesale revenue is falling.

The main risk with wholesale is that brands tie themselves to the fate of another company, which can be a double-edged sword. While getting placement on the shelves of a thriving retailer can be good, struggling wholesalers can impact a brand’s business.

“Wholesale does have some inherent risks,” said Tom Groves, director of account management at the online wholesale marketplace NuOrder by Lightspeed. “Brands do have to give up some control over their storytelling and image, and they also have to closely monitor production. Overproducing due to over-forecasting retail demand can slash profits for brands. But at the same time, brands have to be able to deliver goods promptly and cannot find themselves constrained due to low inventories or shipping problems when retailers want to reorder.”

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